Canada and U.S. on diverging tracks as Trump signs climate order: Don Pittis

Only six months ago, Canada and the United States seemedlike trainson the same track.

Sure, there were policy differences. But especially after the election of aLiberal government in Ottawa, the two capitals were generallyagreed on climate change, free trade, immigration, taxes, bank regulation and many other issues.

But suddenly, with the election of Donald Trump as U.S. president instead of the widely expected Hillary Clinton,everythingchanged.

Different tracks for different folks?

This week, as Trump makes new announcements to soften rules protecting the environment and hints emerge of $18 billionin cuts to social programs,it is as if someone had suddenly opened a switch and turned Canada and the U.S. onto completely different tracks.

If the U.S. abruptly changes direction, can Canada afford to follow its own path?

It was a question that came up obliquely during the recent federal budget as the Liberal government put off details to wait for developments south of the border.

In the U.S., Fed chair Janet Yellenhas raised interest rates twice with at least two more quarter-point rate increases possible later this year to compensate for the stimulating effect of new Trump spending and tax cuts.

I think Canada has the opportunity to present itself as the new shining city on the hill, the place that welcomes diversity and innovation.Frank Graves, Ekos Research

Yesterday Bank of Canada governor Stephen Polozseemed gloomy and disinclined to raise rates. That is helping to push the Canadian dollar down.

"We talk about serial disappointment. It looks OK, but then some new shock comes along," Poloz said yesterday.

Bad or really bad?

Growingprotectionist rhetoricfromthe United States represents one of the potentialshocks of diverging policy.

"If a tariff went up across a border, then consumerson two sides of the border may reactdifferently to those different prices," said Poloz. "Will itbe slightly bad for your business or really bad?"

Until recently, polling data from EkosResearch have demonstrated that values in Canada and the U.S. areremarkably similar, says EkospresidentFrank Graves.And like Trump supporters, many Canadians face anger and despair.

Similar and converging

"The values in aggregate held by Canadians and Americans [show they]are probably the most similar societies in the world and the pattern has been one toward greater convergence, not divergence," says Graves.

Of course, the U.S. and Canadacan see dramatic swings in government policy following an election.

An example of one of those swings was yesterday'snew presidential order opposing climate change.

• Trump issues executive order rolling back climatepolicies

"My administration is putting an end to the war on coal," said Trump. "To reverse government intrusion and to cancel job-killing regulations."

Just as Trump was celebrating his new climate policyErin Flanaganfrom the environmental group the Pembina Institute was issuing a release congratulating the government of Canada for sticking to its climate plan.

"It's clear that the world is changing," she says. "I think it's a really great signal that our government is not going in that Trump direction."

Many supporters of the fossil fuel industry in Canada disagree, saying the divergence in policy will be just one more hit for a troubled sector as U.S. producers get a competitive advantage.

Businesses outside the sector arealso worried theirU.S. competitors could garner furtheradvantagesfrom tax cuts, tariffs favouring the U.S.andderegulation. Meanwhile a free-trading Canada wouldface competition from Europe,Asia and Mexico.

Canadians for Trump

Already Ekosresearch shows a Canadian backlash against Liberal policy and in favour of Trump. Graves says among Canadian Conservatives, his polling show 57 per centsupport Trump's policies although that compares to "single digits" among everyone else.

Graves points out that Canada has takenprofoundly different policy positions from the U.S. over the years. Before the arrival of Trump it seemedthe U.S. was gravitating toward Canada with a move to socialized medicine and legalized cannabis.

But as to whether Canada should stick to its own values or, as Graves says, "get with the room" and be more like the U.S., Ekos polling shows Canadians remain "pretty divided," though people are generally agreed that Prime Minister Justin Trudeau should cultivate a personal relationship with Trump.

But it is possible that at this moment in history, divergence isin Canada's interests.For instance, there are credible forecasts showing Mexico will be the fifth largest economy in the world by 2050, he says.

Is the U.S. going to hell?

"So why would we want to be tying ourselves to the American economy when it may be just going to hell in a hand basket?" asks Graves.

Rather than cutting taxes for the rich and deregulating to boost the economy, Canada can fight anger and despair byemphasizing skills training, knowledge,greater economic equality and openness to the world.

"I think Canada has the opportunity to present itself as the new shining city on the hill, the place that welcomes diversity and innovation," says Graves.

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